Japan's Abenomics and its implication on Asian economy

Mr. Tohru Sasaki, Managing Director and Head of Japan Rates and FX Research, JP Morgan was one of the keynote speakers at the Asia Business Forum, organised by London Business School's Asia Club, on
…

Mr. Tohru Sasaki, Managing Director and Head of Japan Rates and FX Research, JP Morgan was one of the keynote speakers at the Asia Business Forum, organised by London Business School's Asia Club, on 27 April 2013. He spoke about the economic policies advocated by Japan's Prime Minister and the implication that they have to the Asian economy.

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Transcript

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JAPAN'S ABENOMICS AND ITS IMPLICATION ON ASIAN ECONOMY
London Business School, Asia Business Forum 2013, New Balance of Power in Asia
STRICTLY PRIVATE AND CONFIDENTIAL
April 2013
Tohru Sasaki
Head of Japan Rates and FX Research
Global FX Strategy
tohru.sasaki@jpmorgan.com
JPMorgan Chase Bank, N.A.

5.
The Three Arrows in Abenomics
Have BoJ to introduce 2% inflation
targeting
JAPAN'S ABENOMICS AND ITS IMPLICATION ON ASIAN ECONOMY
Bold Monetary Policy
New governor Kuroda announced large
scale purchase of Japanese Government
Bond (JGB)
Mobile & Strategic
Fiscal Policy
Growth Strategy which
stimulates private
sector investment
More than ¥10 trillion of Supplemental
Budget
Detail will be announced in June
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6.
Uncharted monetary policy by Governor Kuroda
1) Changing the target of its monetary policy to the monetary base from the O/N call rate, with the new target being
a ¥60-70 trn increase of the monetary base per year ; double the size in two years.
2) Expanding purchases of long-end JGBs, which includes purchases of 40-year JGBs, while the average maturity
is extended to 7 year from current sub-3 year.
JAPAN'S ABENOMICS AND ITS IMPLICATION ON ASIAN ECONOMY
3) Expanding purchases of ETFs to ¥1 trn/year from the current ¥500 bn, and J-REITs to ¥30bn/year from ¥10bn.
4) Abolishment of the bank note rule.
Monthly purchases of JGBs : ¥3.5 trn (Rinban: ¥1.8 trn, APP: ¥1.7 trn)
¥7.0 trn (monthly issuance is about ¥10.0 trn)
5) Integration of the APP and Rinban operation.
BoJ will buy 6-10yr sector of JGB at the tune of ¥3.4 trn/month, while issuance
of this sector is just ¥2.4 trn/month
6) Strengthened communication with the market.
BoJ promised to increase JGB holdings by ¥50 trn/ year. JGB holdings by
domestic banks : ¥83 trn
(vs
Central Banks’ balance sheet size (vs GDP)
BoJ’s balance sheet is expected to expand from
34% of GDP (Feb.2013) to 46% of GDP (Dec.2013)
and 60% of GDP (Dec.2014).
On the other hand, the Fed’s balance sheet is
expected to expand from 20% of GDP to only 25%
of GDP by end-2013. It will most likely stay at the
same level in 2014.
60%
forecast
50%
40%
BoJ
ECB
30%
FRB
20%
BoE
10%
SNB’s balance sheet size is 86% of GDP. Foreign
currency assets consist of 87% of the SNB’s
balance sheet.
5
0%
Jan 01
Jan 03
Source: BoJ, FRB, ECB, BoE
Jan 05
Jan 07
Jan 09
Jan 11
Jan 13

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JAPAN'S ABENOMICS AND ITS IMPLICATION ON ASIAN ECONOMY
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JAPAN'S ABENOMICS AND ITS IMPLICATION ON ASIAN ECONOMY
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